A new wave of criticism of China by US and European business leaders has made it fashionable once again to accentuate the negative elements of the Sino-American economic relationship. Chinese strategy, conventional wisdom dictates, aims to lure foreign multinationals with the bait of market share, and then snare as much advanced technology as possible while restricting market access. In his new book, Handel Jones, CEO of the consulting firm International Business Strategies, claims to have a compelling antidote to this notion.
"Chinamerica" – a portmanteau unlikely to win backers over from historian Niall Ferguson’s punchier "Chimerica" – ostensibly refers to "a collaboration for sharing American and Chinese wealth in an equitable way." It is an interesting thesis, not least because the next 262 pages proceed to enthusiastically detail how the US can defeat China in the international battle for said wealth.
A martial art
Jones takes as his conceptual framework the idea of business as war. However, it is not just individual firms, but nations that are competing. Corporations are 21st century armies, "attacking vulnerable external markets while protecting their markets within their home turf," and ultimately "reducing the wealth-generating potential of the defeated territory."
The problem with this approach is that it relies on the specious and tired metaphor that equates international trade with military conflict. While the redistribution of industries and employment caused by liberalized international trade is rarely economically or politically painless, trade does not destroy net national wealth the way warfare destroys nations.
An illustration of this zero-sum error is provided in the author’s brief lamentation of the UK’s fall from grace. "The wealth of the UK will continue to decline," Jones writes. "Average annual gross domestic product (GDP) growth has lagged that of the United States since 1971. And little wonder: At this point the United Kingdom has little or no indigenous automotive, computer, or electronic industry."
Indeed, the UK has experienced a relative decline, falling from the world’s fifth-wealthiest nation in 1971 to its six-wealthiest today. The UK’s GDP grew from US$142.2 billion in 1971 to US$2.66 trillion in 2008, increasing GDP per capita from US$2,550 to US$43,500 over the same period. If this is defeat, it’s a pleasant way to lose.
Building on his military premise, Jones makes a series of recommendations for maintaining American economic primacy. He argues that the US must adopt five- and 10-year industrial plans to guide its economy. These would provide federal funding to industries based on metrics including their contribution to domestic employment, their local market share and the value of their exports. While individual corporations would not be singled out to receive funding, their business plans would be aggregated at a national level to spur development.
This prescription, which would constitute nationalization and central planning of broad swathes of the American economy, is extreme. It is also a manifestation of an insecurity that pervades much American commentary on China.
As they have done in the past, many American intellectuals are pining for the efficiency of authoritarianism over democracy. American politics can be shortsighted, populist and partisan, fueling political waste and gridlock. The resulting public indebtedness, decrepit infrastructure, and ineffective regulation provide a visceral contrast to China’s massive reserves, high-tech infrastructure, and rapid government decision-making.
But China’s success over the past 30 years is the result of economic liberalization, which unleashed the chaotic energy of markets. Beijing’s enduring nostalgia for five-year plans should not be taken too seriously; if anything, China has been successful because its economic policies have been fundamentally flexible. China is not so much a threat to the United States as the ultimate testament to the soundness of its economic system. It would be a bitter irony if, panicked at the sight of its most successful pupil, the US succumbed to the false allure of economic authoritarianism in pursuit of a pyrrhic economic victory.